Many suppliers on Alibaba.com, and other supplier directories, claim to offer Original Equipment Manufacturing (OEM) and Original Design Manufacturing (ODM) products. In this article, we explain what OEM and ODM mean in the context of manufacturing in China, and other Asian countries.
Whether you decide to get an OEM or ODM product manufactured impacts the entire process, from supplier sourcing and RFQ to product samples and manufacturing.
Definition of Original Equipment Manufacturing (OEM)
An OEM product is made according to the buyer’s product specification. For example, any product with a customized design, material, dimensions, functionality, or even colors can be classified as OEM.
Product specification examples
Bill of materials
To some, OEM only refers to products that are designed entirely based on the buyer specification, while others classify even the slightest modification of an existing ODM product design as OEM.
That said, most buyers and suppliers would agree that the primary definition of an OEM product, is a product for which tooling (for example, injection molds) must be produced before production can start.
Definition of Original Design Manufacturing (ODM)
An ODM product is based on an existing design – to some extent developed by the manufacturer rather than the buyer. An ODM product can either be the result of the supplier’s own product development efforts – or a replica of another product that’s already on the market.
ODM products, which are often called ‘private label products, can be branded with the buyer’s logo. Further, ODM products can in many cases be modified to a certain extent.
However, you’ll enter “OEM territory” if you attempt to change the design or dimensions of an ODM product.
What does it mean when a supplier on Alibaba.com claims to offer OEM services?
‘OEM service’ refers to the supplier’s ability and willingness to make products according to the buyer’s design. That said, basically, every supplier in Alibaba and Globalsources.com can make OEM products. In fact, that’s what they are accustomed to.
Hence, you don’t need to go out of your way to search for suppliers that actually state that they offer OEM products, as it can be taken for granted.
On the other hand, finding suppliers that offer ‘real’ ODM products can be much more of a challenge, as explained in this article. Some suppliers even reject quotation requests based on ODM products as they only work with OEM buyers.
What does it mean when a supplier claims to offer ODM products?
It’s easy to get mistaken by product listings in various supplier directories and assume that the suppliers actually ‘have’ all the listed products. It’s actually not that uncommon for suppliers to list products that they have never even manufactured.
Here are some product types suppliers add to their directories:
a. Customer products: These designs (and the tooling) may be owned by existing customers. The product is only shown to demonstrate what they have made in the past, but the supplier may not have a fixed spec sheet or even the design drawings for the product. b. Demo products / fake products: Some suppliers upload images of products that they never actually manufactured. Hence, the buyer must pay for the tooling, in which case it is questionable if the product can even be classified as an ODM product at all. That said, it can be acceptable, if it is a digital design created by a supplier to showcase what they can make. c. Supplier developed product: Some suppliers invest in product R&D and tooling, but this is only a small part of all listed products on the major supplier directories. If you go down this route, keep in mind that the supplier will have a lot of leverage as the product is their IP.
Are ODM products off-shelf or stock products?
ODM products are not necessarily products that are available to order directly from their existing warehouse. In most cases, ODM products only exist on paper – for example, product photos, renderings, or drawings. The supplier must still enter production before they can ship products – which normally takes at least 30 to 40 days.
As such, all off-shelf products are ODM products – but not all ODM products are available off-shelf.
In which industries are ODM products more common?
ODM products are more common in more R&D and capital intensive industries – such as electronics, machinery, and medical devices. On the contrary, ODM products are less common in the clothing or textiles industry.
Where can I find suppliers offering ODM products?
There is no strict category of ‘ODM suppliers’. Essentially all manufacturers have started off as OEMs – which means that they are primarily making products based on their buyer design and product specification.
Some suppliers have invested in developing their own ODM products, while other just uploads ‘for reference only’ products to their Alibaba or Global Source pages.
It’s also important to note that ODM products are far more common in Mainland China, compared to Vietnam and India. I think the reason is that Chinese factories have simply accumulated more tooling, machinery, and capital over the years. Further, many also sell ODM products on the domestic Chinese market.
My experience is that the ODM product approach is very difficult to apply in Vietnam and India – at least outside furniture and some other industries.
How do I know if a supplier offers OEM and/or ODM products?
As mentioned, there are very few manufacturers that don’t offer to produce OEM products. When it comes to ODM products I recommend that you request a product catalog to find out if they have any ODM products to speak of.
That said, you must explain that they should only list products that they have already manufactured. Otherwise, you may receive random photos taken from other websites or even renderings of products.
Is ODM the same thing as Private Labeling?
Yes, ODM and private labeling is essentially the same thing. The concept behind ODM and private labeling is that the supplier provides a template product, that the buyer can brand with their own logo.
Hence, the buyer can save time on money, as they don’t have to go through a lengthy product development process or invest in expensive injection molds and other tooling.
Can I get a product specification for an ODM product?
It’s quite rare that suppliers are able or willing to provide an actual product specification, including design files and a bill of materials. In case they have it they tend to be quite reluctant to share such files.
Hence, buyers are often forced to sort of reverse engineer the product by creating a product specification by documenting the ODM product.
Take product photos
List materials and create a BoM
You may also need to create complementary materials, such as compliance marks, logo placement renderings, and mockups.
How can I be sure that the ODM product is patented by another product?
One major risk when buying ODM products is that of “accidentally” infringing the IP of another company. Imagine buying an ODM product only to find out that it’s a replica of an already patented product in your target market.
My best recommendation is that you hire a lawyer to do a patent search before you go ahead with an ODM product.
Is it easier to buy ODM than OEM?
Many buyers assume that it’s always easier to buy ODM than OEM products. It’s actually often the opposite. This may sound counterintuitive, but trying to reverse engineer a product specification and work out the available customization options for an ODM product is often more time-consuming than creating an OEM product from scratch.
Further, the OEM process often reasons better with suppliers.
Are ODM products cheaper than OEM products?
There is generally no difference in terms of unit prices between ODM and OEM products. That said, ODM products are cheaper and faster to bring to the market as no tooling is required.
Is the MOQ lower for OEM or ODM products?
There is generally no difference in terms of the minimum order quantity (MOQ) requirement between OEM and ODM products. However, some suppliers may offer a lower MOQ for standard materials – but such materials can often be applied to both OEM and ODM products.